Looking for further information?

We use cookies to provide a user-friendly experience. By continuing to browse this site, you give consent for cookies to be used. To find out more how to set your own preferences please read our Cookie Policy.

By continuing to browse this site, you give consent for cookies to be used. To find out more please read our Cookie Policy.

IMPORTANT INFORMATION

Please read this Important Information carefully before proceeding, as it explains certain restrictions imposed by law on the distribution of the information on this sites and the countries in which our products are authorised for sale. If you do not agree to the below, please click “I Disagree” and do not enter this site.

This site is not directed to any person in any jurisdiction where (by reason of that person’s nationality, residence or otherwise) the publication or availability of this site is prohibited and it is only intended for viewing by existing investors in the investment products distributed by us on a private placement basis and for Hong Kong investors who qualify as “professional investors” under the Securities and Futures Ordinance (Chapter 571 of the Laws of Hong Kong) or rules made there under. Persons in respect of whom such prohibitions apply or persons other than those specified above must not access this site. It is your responsibility to be aware of and to observe all applicable laws and regulations of any relevant jurisdiction. By proceeding, you are representing and warranting that the applicable laws and regulations of your jurisdiction allow you to access the information.

This site may contain information on investment products that are not authorised by the Securities and Futures Commission for sale to the public in Hong Kong and may not be viewed by Hong Kong investors who are not professional investors. Any product documents and information contained herein are for reference only and for those persons or entities in any jurisdiction or country where the information in such product documents and use thereof is not contrary to local law or regulation. They are only for the intended recipients and shall not be reproduced in any form or transmitted to any other third parties. Due care should be taken by all intermediaries that they comply with all relevant local rules and regulations in responding to requests from clients for information in respect of the investment products referred to on this site. In particular, intermediaries should take note of the restriction that no offer shall be made to the public in Hong Kong in respect of the investment products that are not authorised by the Securities and Futures Commission for sale to the public in Hong Kong.

Investment involves risks. Past performance is not a guide to future performance. The value of investments and any income from them may go down as well as up and investors may get back less than the amount originally invested. Fluctuations in exchange rates may affect the value of an investment and any income derived from it.

The materials on this site are being provided solely for information purposes, and are not intended to and shall not in any way constitute an invitation or an offer to invest in any investment products. Certain information on this site is based on assumptions, information and conditions applicable at a certain time and may be subject to change at any time without notice. Nothing contained within this site should be construed as investment advice by Merian Global Investors or of any other regulated activity. This site is not a substitute for independent professional advice and users of this site should obtain appropriate professional advice relevant to their particular circumstances prior to making any investment decisions. The site must not be relied upon in connection with any investment decision. The products on this site may not be suitable for all investors. For detailed product information, including the risks associated with investing, please read the relevant offering document before making an investment decision. If you are unsure, please talk to your financial adviser.

This site is issued by Merian Global Investors (Asia Pacific) Limited and has not been reviewed by the Securities and Futures Commission. Merian Global Investors (Asia Pacific) Limited is licensed to carry out Type 1, Type 4 and Type 9 regulated activities in Hong Kong.

Before proceeding, you are reminded that your use of this site is subject to Terms and Conditions of use. By clicking “I Agree” below, you confirm that you are a financial adviser or financial intermediary and qualify as a “professional investor” under the Securities and Futures Ordinance in Hong Kong, and you have read the Terms and Conditions including the Privacy Notice and Cookies Policy and agree to be bound by them. In particular, by continuing to use this site, you consent to the use of cookies in accordance with our Privacy Notice and Cookies Policy.

STAY IN TOUCHWITH OUR INSIGHTS

Fixed income

European Commission rejects Italian budget

Consistent with recent rhetoric, Italy has not yet budged on the headline deficit figure of 2.4%, thus setting up a clash with European leaders. The budget delivers on many of the League and Five Star Movement’s pre-election promises such as rolling back pension reform, lowering the retirement age, tax deductions and a citizens’ minimum income.

Even so, it was impossible for the EC to accept the proposal. League leader and Deputy Prime Minster Matteo Salvini, who leads in opinion polls, knows this and his strategy is becoming clearer. In our opinion, he is prepared to gamble with Italy’s solvency in order to trigger political change at the European Parliament elections in May.

The EC will be hoping that budget discipline will be enforced by the now infamous ‘spread’, the yield difference between Italian and German government debt, but Italy has termed out its debt. With an average maturity of over seven years, higher interest costs hurt, but it is a slow burn and Salvini has indicated that his tolerance for the spread to widen is higher than the current level, perhaps 100 basis points from here. He believes he has a window before Italian debt finds itself on an unsustainable path.

Between now and the May elections, the budget dispute will provide plenty of opportunity for Salvini to talk down the current European Union (EU) leadership. He sees the elections, where the relatively liberal UK members will disappear from the chamber, as a chance to deliver the European Parliament to the populists. His recent grandstanding with Marine Le Pen, president of the recently re-named National Rally party in France, makes this clear. The first casualty would be the EU’s Stability and Growth Pact, which enforces budget discipline.

It would take a large shift in opinion polls for Salvini to achieve this, especially if French President Emmanuel Macron’s En Marche! movement performs well, so perhaps the deputy prime minister feels he has little to lose. Still, we expect a big change in the make-up of the European parliament that will make cross-border policymaking more difficult and keep risk premiums high, especially without the European Central Bank’s bond-buying backstop.